Why MTN and Airtel Banks Will be Bigger Than Traditional Banks, According to Experts

Why MTN and Airtel Banks Will be Bigger Than Traditional Banks, According to Experts

  • MTN and Airtel banks are set to displace regular Deposit Money Banks, say experts who believe the traditional banks are jittery due to their emergence
  • The two leading telcos will deploy their massive reach to drive financial inclusion in the rural areas, thereby rendering the traditional banks ineffective
  • Already the duo of MTN and Airtel have secured licenses to operate both as PSBs and Super Agents to regular banks

Nigeria's Central bank's licensing of two big telecom operators has thrown up a challenge to banking giants, deposit money banks, whose services are spread across big cities and business hubs.

The Central Bank of Nigeria (CBN) issued two specialised banking permits to two leading telecommunication companies in the country recently.

MTN and Airtel Banks
Airtel shop in Lagos. Credit: George Osodi/Bloomberg
Source: Getty Images

MTN Nigeria and Airtel Nigeria, both leading mobile telecom operators in the country, secured licences to operate payment service banks, thus tightening the space for traditional banks.

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They will join 9Mobile, owners of 9PSB, the first telecoms company to launch a payment service bank in Nigeria to scramble for Nigeria’s unbanked population.

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PSBs operate in rural areas to capture the unbanked and the financially excluded population, according to the CBN.

MTN's huge spread

MTN will build on the success of its Momo payment platform, which has agents spread across the country. MTN's bank will be known as Momo Payment Service Bank.

With over 150,000 Momo agents spread across the 774 local government areas in Nigeria, MTN's ride to becoming the biggest player in the sector is assured.

Airtel hopes to leverage its nationwide spread. There are few places in the country where Airtel's presence is not felt.

A few days after getting a license to operate Payment Service Banking services, it secured another license from the CBN to also operate as Super Agent.

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Local media reports say that in a corporate filing on the Nigeria Exchange Limited (NGX), the company said Airtel Mobile Commerce Nigeria, its subsidiary will operate the agent banking licence.

Super agents are companies licensed by CBN to recruit agents for agency banking, such as financial services across the communities for the banks to deepen financial inclusion.

The big players, which have focused their operations in the big cities, will play catch up, hence their latching onto telcos to deepen their operations in the rural areas, analysts say.

What experts say

Experts also predict that as the deposit money banks were sluggish in embracing robust fintech services until they were almost pushed out, their slow pace in embracing rural banking may be one of their greatest undoings.

According to 2019 statistics, Nigeria has over 73.2 million active bank accounts. Over 60 per cent of the account holders are in major cities.

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With telecom operators launching banking services targeted at the rural dwellers and the financially disadvantaged, the race is just beginning.

MTN and Airtel granted payment service licenses

Legit.ng earlier reported that MTN Nigeria and Airtel Africa Plc were granted preliminary license to establish a payment service bank (PSB) in Nigeria.

The two telecommunication companies disclosed this in regulatory filings on the Nigerian Exchange Limited (NGX) on Friday, November 5, 2021.

The CBN has been striving to get more Nigerians who do not have a bank account into the financial system, and the telecommunications huge customer base will aid in this effort.

Source: Legit.ng

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